The Bangko Sentral ng Pilipinas (BSP) said Friday said most Philippine banks’ credit standards were “generally unchanged” in the fourth quarter of 2023.
The BSP said in a statement the survey indicated that 88 percent of the respondent banks kept their credit standards for lending to businesses and consumers based on the modal approach.
Its DI approach showed a net tightening of overall credit standards across all borrower firm sizes due to banks’ lower risk tolerance, deterioration of borrowers’ profiles and profitability of banks’ portfolios, along with stricter financial system regulations.
“Over the next quarter, both the modal and DI methods indicated respondents’ expectations of generally unchanged credit standards for enterprises amid banks’ sustained tolerance for risk and stable outlook for the overall economy as well as for industries and firms, along with the steady profiles of borrowers,” the BSP said.
For commercial real estate, a higher proportion of respondents or 82.9 percent maintained overall credit standards for commercial real estate loans (CRELs).
However, results from the DI method pointed to a net tightening credit standards for CRELs mainly due to a deterioration in borrowers’ profiles and banks’ reduced tolerance for risk. In the next quarter, a larger number of participating banks anticipate to keep their loan standards for CRELs unchanged based on the modal approach, while the DI-based results show expectations of net tightening credit standards for CRELs.
The majority of the surveyed banks (70.6 percent) also retained their lending standards for household loans in the fourth quarter of 2023.
DI-based results, on the other hand, pointed to net easing credit standards for consumer loans[mainly associated with the improvement in profitability of banks’ portfolios, higher risk tolerance, and less uncertain economic outlook.
For the first quarter of 2024, the modal results showed a higher number of bank respondents anticipating maintained loan standards for households, while the DI approach indicated a continued net easing of credit standards driven by banks’ expectations of improved profitability of their portfolios, higher risk tolerance, and more favorable economic outlook.
For housing loans, the survey showed a larger percentage of respondent banks (64.5 percent) that have generally unchanged credit standards for housing loans.
Meanwhile, the DI results indicated net easing lending standards for housing loans largely due to higher profitability in banks’ portfolios, more desirable borrowers’ profiles, and banks’ increased risk tolerance.
Over the following quarter, most respondent banks anticipate unchanged lending standards for housing loans while the DI results pointed to expectations of net easing in housing loan standards.
The survey also showed that most of the banks (66 percent) pointed to generally steady demand for credit from businesses based on the modal method.
However, the DI approach showed a net increase in loan demand from across all firm classifications driven by bank clients’ more optimistic economic outlook, increased customer inventory financing and accounts receivable needs, including lack of other sources of funds.
Over the next quarter, most of the respondent banks expect broadly steady loan demand from businesses. Meanwhile, the DI method indicated that participating banks anticipate a net rise in credit demand from businesses for the first quarter of 2024 driven by customers’ more positive economic prospects along with higher customer inventory financing and accounts receivable needs.
In addition, loan demand for commercial loans remains generally unchanged in the fourth quarter of 2023 and is also expected to be maintained in the first quarter of 2024.
A higher percentage of participating banks (56.3 percent) also indicated generally steady loan demand from consumers in fourth quarter of 2023 based on the modal approach. The DI method, however, pointed to a net increase in consumer loan demand across all major loan categories due to higher household consumption and banks’ more attractive financing terms.
Bank respondents noted an increase in demand for housing loans in fourth quarter of 2023 and expect the same situation in the first quarter of 2024 using both modal and DI approaches.
“The higher residential real estate loan demand in the current quarter and the next quarter is due to rising household consumption and housing investment, as well as banks’ attractive financing terms,” the BSP said.
